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TDS on cash withdrawal of more than Rs. 1 cr

TDS ON CASH WITHDRAWAL (SECTION 194N)

Applicability:

The Finance (No. 2) Act, 2019 has inserted a new  section 194N, with effect from 01 September, 2019, provides that every person, being-

  • a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act);
  • a co-operative society engaged in carrying on the business of banking; or
  • a post office,

who is responsible for paying, in cash, any sum or aggregate of sums exceeding ₹ 1 crore during the previous year to any person from one or more accounts maintained by such recipient-person with it, shall deduct tax at source @ 2% of sum exceeding ₹ 1 crore. 

Time of Deduction:

The deduction is to be made at the time of payment of such sum.

Rate of TDS:

 @ 2% on payment of sum exceeding ₹ 1 crore.

Non- applicability of TDS:

No tax is required to be deducted at source under section 194N on cash withdrawals by person or class of person as notified, in consultation with the RBI, by the Central Government.

Liability to deduct tax at source under this section shall not apply to any payment made to -

  • the Government;
  • any banking company or co-operative society engaged in carrying on the business of banking or a post office;
  • any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934;
  • any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorization issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007;
  • such other person or class of persons, which the Central Government may, by notification in the Official Gazette, specify in consultation with the Reserve Bank of India.

Manner of computing the threshold limit of ₹ 1 crore:

The CBDT has, vide press Release dated 30/08/2019, clarified that section 194N is to come into effect from 1st September 2019. Hence, any cash withdrawal prior to 1st September 2019 will not be subjected to the TDS under section 194N. However, since the threshold limit of ₹ 1 crore is with respect to the previous year 2019-20, calculation of amount of cash withdrawal for triggering deduction under section 194N shall be counted from 1st April 2019. Hence, if a person has already withdrawn ₹ 1 crore or more cash upto 31st August,2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, TDS@ 2% shall apply on all subsequent cash withdrawals.

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